Thursday, May 10, 2007

Wal-Mart Is Starting To Look Vulnerable

Wal-Mart Stores Inc. posted its worst monthly same-store sales results in at least 28 years, tallying a 3.5% decline in April due to this year's early Easter as well as generally challenging economic conditions for consumers.

Wal-Mart's 3.5% drop in the four-week period ending May 4 at U.S. stores fell below its earlier forecast of "flat" sales to a 2% decline. In a recorded phone message Thursday, Wal-Mart blamed bad weather last month in most U.S. regions and the early Easter on April 8, which pushed many Easter sales into March.

I know the situation is much more complicated, but the stratification of the society is starting to take root. People who have no option about shopping at Wal-Mart, especially if it killed off the competition in their towns are still shopping there. But the economy is not that great for those on the bottom rungs of the ladder. Wal-Mart's quality is getting worse. Their meats, vegetables (at least in the stores I have been into) are atrocious. The casual Wal-Mart shopper who would go there for a bargain doesn't find unattractive meat and produce that tempting.

Wal-Mart has been innovative in squeezing every last dollar out of suppliers, manufacturers until they can bleed no more. I think we might be getting to a point that there is no plasma left in the turnip. Wal-Mart runs the risk of being K-Mart unless they hold onto the middle class shoppers. Cheap Chinese manufactured junk isn't going to cut it much longer.

People do get confused about economics, but a toaster that costs $10 and lasts 2 years isn't "cheaper" than one that costs $50 and lasts you a lifetime. The desperation Wal-Mart shoppers are not going to keep the company growing. Have you seen their paychecks lately?